Buyer's Market in Denver?? Think again people!
Call this a rant, a complaint or maybe just down right out common sense but the days of showing buyers homes for under $250,000 and thinking that you're King or Queen of the Hill are over! Right now, depending upon the market for that area, for that square footage, for the number of beds and baths in the home your buyers love...there could be multiple offers on the day and hour you see the home.
Let's face it, there are four types of homes for sale for your a-typical buyer, out on the market: Regular Sales, Short-Sales, Real Estate Owned (REO) Bank Properties and New Construction. This exist in every market in every state but each situation only fits certain types of buyers for each of these three types of homes.
Let's get into the nitty-gritty.
SHORT-SALES - The name itself seems like an oxymoron. My friends, there is nothing short about a short-sale. This type of home takes a buyer who's got time on their hands. They're not concerned or moved by the fact that interest rates on a 30 year fixed FHA are at 4.375% or 3.0% on a conventional 5/1 ARM (call for details). These are the buyers who's lease is up in the next 6 months and they've got time on their hands and want to cash in on a bargain. Not a bad buyer at all...just someone who's got the patience and resolve of the guy on "Man vs. Food" who's got a 15 lb burger to eat in 3 hours.
Buyers for these types of homes, under $250,000 should expect that only ONE offer will be submitted to the bank at a time. If you run into a situation where you're in a line of back-up offers for the same home...well...I would keep looking. In a number of cases, the first buyer changes their mind during the six month process of buying the home and abandons the contract. This gives the number two buyer a chance to grab a deal. If you find a short-sale that says "Short-Sale has been APPROVED by the Lender" and if there's no offer on that home...WRITE ONE TODAY! In situations like that, you may have found a bargain and may not have to wait very long to move in.
One item to note about Short-Sales: there are a number of sincere real estate agents who have them listed on the market for dramatically low prices just to get a buyer. Please keep in mind that if you're one of the first to have your offer submitted to the bank who owns the mortgage for that house, and that house is significantly under its value, the bank will probably let the home go into foreclosure first before allowing you to purchase it. Remember...you're dealing with a bank...not necessarily the home owner so expect them to play hard ball.
Regular Sales - This is a situation where the home is worth more than the home sellers owe on the mortgage. (they do exist!) They are sellers who want to move up or down to the next home and are ready to move. They're in competition with the prices on the REO and Short-Sales but they're willing to get it sold.
Buyers for these types of homes should expect to be able to occupy the home in as little as a week (with a cash offer) to 45 days if you need to get financing. These are the homes that you might be able to negotiate with the home owner a little for extra closing cost cash or to fix that hail damaged roof. They will typically have a little to work with and be a little more flexible. In situations where they've already received many offers over the weekend on their home, they'll be a little more willing to listen to your emotional appeal than others types of home sellers.
REO/Bank Owned Properties - Get ready for the three minute roller coaster ride on this one! So, here's a way to pick up a home that may or may not need some work (depending on the bank), for cheap, and really get a great deal. Watch out, as this dance partner has teeth and an appetite for money.
These types of homes are really for those wanting to purchase something that has a good amount of equity (value) in it. Usually, the bank who foreclosed on the home wants to get rid of the asset as quickly as possible to clear their books. That being the case, many of these homes are under market priced for a quick purchase. In some cases, mostly homes owned by Fannie Mae (FNMA) or Freddie Mac (FHLMC), the home has been a little updated including new carpet, new appliances and sometimes new lighting fixtures.
For home buyers of these types of homes, you'd better move quickly. Once they reach a certain price-point, they don't last and they won't entertain multiple offers! I have seen buyer after buyer go into one of these homes and on to the next, only to find that an offer was submitted on that home the very day they saw it and they've lost the opportunity.
Expect that any offer you submit on these homes to be counter offered for a little more money and a little less closing cash if you're asking for it. In most cases, it takes the banks who own the home about two to three days to get back to you about an offer you're making. Also, most of these properties are in "AS IS" condition meaning that they won't fix the bathtub, or that rotting base on the kitchen sink cabinet. You may have to do some work on these...maybe a lot of work...but in the long run, it's worth it for how much equity you will have gotten from these. You can also expect to be able to move into these within about 30 - 45 days from the offer. That is, of course, you can live in it while you're doing the remodel.
New Construction - Ah...the look and feel and who could forget the SMELL of a new home! Believe it or not, you can purchase a brand new home, here in the Denver area for under $200,000! These homes are perfect if you're the discriminating buyer looking for everything to be perfect, nice and new. When you drive up to these homes, you've usually got a couple choices to make. Either you can purchase something called a "Spec Home / Model Home" or purchase a New Build. A Spec Home will be one that's in the builder's inventory that has been completed or almost completed and is ready for a buyer. In certain cases, a Spec Home will be a model that needs a little conversion but is worth it for the price.
New Builds are great for customization and can come with some really wonderful upgrades as long as you don't mind the wait or the money. Building new means you get to put in your own finishes, interior and exterior, from the options that they have available for you. You can have a somewhat customed home in this instance.
Builders are usually involved with a mortgage company and can offer some very enticing incentives for their homes. Some buyers find new construction a little cost prohibitive up front unless you go in with your eyes wide open. Usually a builder will require a earnest money deposit of 2 to 4% of the sales price to be paid immediately upon writing the contract. They can also roll in closing costs into the deal so there's no additional out of pocket expense at closing.
When you purchase a new construction, expect to have two options when considering writing a contract: "take it or leave it". There's really no offer in this situation and it's incredibly important to have your own Real Estate Professional with you to ensure you know all that's going on with the contract since it's a one stop shop event. It's wise to have another person with you to make sure you understand all you need know when moving forward into one of these types of purchases.
Buying a home in our market, as well as other markets at the $250,000 or less price point, can be challenging and rewarding. Go in with the right expectations. Ask plenty of questions and expect excellent straight-forward answers. Do not work with a real estate agent who's not concerned in you or your needs and does not take the time to listen. Find the professional who's willing to invest in you as much time and energy as you will money into the home you're buying. Remember, any agreement that you have with an agent who's not considering your needs first is just a termination letter away from the finding the Right Agent to work for you. With the purchase of a home being one of your most expensive assets, having a free agent doesn't have mean that you're getting a low caliber agent. Insist on the best for you and your family.
Now, there are homes waiting for you to discover in a market with interest rates that mean that you can afford much, much, more home for your money. So let's get out there and find that home!
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